The Accountant for Pix Photographic supply Ltd

The Accountant for Pix Photographic supply Ltd has estimated the following activity cost pools and activity drivers for the coming year:

Activity

Budgeted overhead cost $

Activity driver

Required level for activity driver

Cost per unit of activity driver

Machine setups

300,000

No. of setups

100

$3,000 per setup

Material Handling

150,000

Weight of raw material

50,000 kg

$3 per kg

Hazardous waste control

75,000

Weight of hazardous chemicals used

10,000 kg

$7.50 per kg

Quality control

112,500

No. of inspections

1,000

$112.50 per inspection

Other overhead costs

300,000

Machine hours

20,000

$15 per machine hour

Total

937,500

An order for 1,000 boxes of film development chemicals has the following production requirements:

Machine setups

4 setups

Raw material

10,000 kg

Hazardous materials

2,000 kg

Inspections

10 inspections

Machine hours

500 machine hours

Required

Calculate the total overhead that should be assigned to the order for development of chemicals.

What is the overhead cost per box of chemicals?

If Pix Photographic Supply wee to use a plant-wide predetermined overhead rate based on machine hours, calculate he rate per hour.

Under the approach in requirement 3, how much overhead would be assigned to the order for development chemicals:

in total

per box of chemical?

Explain why these two product costing systems result in such widely differing costs. Which system do you recommend? Why?

Calculate the unit cost of a production order for 100 specially coated plates used in film development. In addition to direct material costing $180 per plate and direct labour costing $60 per plate, the order requires the following:

Machine setups

2 setups

Raw material

800 kg

Hazardous materials

300 kg

Inspections

3 inspections

Machine hours

50 machine hours

Question 2: Variable costing

Slumberworld Pty Ltd’s planned production for the current year was 15,000 units. This production level was achieved, but only 13,500 units were sold at $60 each. Other data are as follows:

$

Direct material used

120,000

Direct labour cost incurred

60,000

Fixed manufacturing overhead (actual and planned)

75,000

Variable manufacturing overhead (actual and planned)

36,000

Fixed selling and administrative expenses

90,000

Variable selling and administrative expenses

13,500

Finished goods inventory, 1 January

None

The company uses normal costing. There were no work in process inventories at the beginning or end of the year.

Required

Prepare an income statement for Slumberworld for the current year using:

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